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New Zealand: Post-import adjustments in pending customs legislation

New Zealand: Post-import adjustments, pending

Related content

The new customs law would change the post-importation adjustment regime. Under the current system, post-importation adjustments are typically disclosed by filing regular reconciliations (usually annually) or by filing a voluntary disclosure. Once the reconciliation or disclosure is accepted, New Zealand Customs issues a confirmation letter and makes an assessment of any additional goods and services tax (GST) and customs duty resulting from the adjustment.

Under the pending customs legislation, a “provisional value” system would be introduced for post-importation adjustments. Under this new system, eligible importers would declare a provisional import value when the goods are initially cleared for import, and then would “true up” the declared value at a later time when all information required to finalise the value is available (for example, when the amount of the year-end transfer pricing adjustment is known).

Importers that are part of multinational groups could be affected by this change because there may be additional charges payable to related parties after the goods have been imported—for example, year-end transfer pricing adjustments could be such a common post-importation valuation adjustment. Read TaxNewsFlash

To be eligible to participate in the provisional value regime, the importer would need to satisfy certain requirements, under which importers would be separated into three groups:

Importers that have advanced pricing agreements

Importers that have valuation adjustments relating to certain prescribed additions (e.g., royalties, license fees) which are unknown at the time of import

Importers that have approval from Customs to apply the provisional value scheme (the “all other importers” bucket)

The first two categories of importers would have an automatic right to apply the provisional value scheme. The “all other importers” seeking to apply the provisional value scheme would have to rely on New Zealand Customs’ discretion. If an importer is not able to participate in the provisional value scheme, the fall-back option for disclosing a post-importation adjustments would be to file a voluntary disclosure. If an importer could not apply the provisional value scheme and disclose a post-importation adjustment by making a voluntary disclosure, then the importer would be subject to interest on the resulting GST and customs duty shortfall—that is, additional costs to an importer. Could it also create a disincentive for importers to disclose post-valuation adjustments? There may be ways to manage the cost and risk on both sides.

Read an April 2018 report prepared by the KPMG member firms in New Zealand and Australia

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